Health NZ's IT Failures: A Case for Better Supplier Management
Author: Alan Day, Chairman and Founder

Auckland Hospital's recent struggles with its new IT system has led to frustration among staff and renewed public concern over Health New Zealand’s digital transformation strategy (published by NZ Herald). Reports of delays, errors (according to our sources the new system doesn’t include the correct follow up appointment flags leading to many cases of many patients not receiving their next appointment invite and ultimately the correct level of care), and increased workloads reflect not only the challenges of implementing modern systems but also expose underlying issues Health New Zealand has in managing suppliers effectively.. While funding shortfalls have contributed to these failures, robust Supplier Relationship Management (SRM) practices and processes could have significantly reduced supplier-led problems and improved outcomes for frontline healthcare professionals and patients alike.
A Growing List of Digital Failures
Health New Zealand has faced a string of IT-related setbacks:
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The "Ghastly" New System: Auckland City Hospital’s new IT system has been described by frustrated staff as “ghastly,” causing delays and increasing errors. While the system’s poor usability reflects a disconnect between supplier delivery and user needs, it also raises questions about whether Health NZ provided adequate specifications and requirements to ensure the system met practical demands.
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Obsolete Systems: Hospitals have been forced to rely on aging, “functionally obsolete” IT systems, creating mounting maintenance costs and frequent disruptions.
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Data Errors: System upgrades have introduced incorrect patient data, posing risks to patient safety and eroding trust.
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Troubled Payroll Upgrades: Health NZ’s payroll system upgrade has been plagued by delays and technical failures, directly impacting healthcare workers’ pay and morale.
Each of these incidents reflects broader challenges in managing suppliers effectively. While cost pressures and funding constraints play a role, poor supplier performance, miscommunication, and insufficient oversight have amplified the scale of these problems.
Funding Alone Isn’t the Full Story
Much of the blame for Health New Zealand’s IT struggles has focused on funding shortfalls. Years of deferred investment have left hospitals relying on outdated systems. In some cases, budget cuts have forced Health NZ to prioritise reactive fixes, such as payroll stabilisation, over much-needed digital upgrades.
But funding is only part of the picture. Supplier performance has also played a significant role, with examples of missed deadlines, poor implementation, and systems that fail to meet user needs. Better management of supplier relationships may have allowed Health NZ to maximise value from its investments, even in a constrained financial environment.
The Role of Good Supplier Relationship Management (SRM)
Supplier Relationship Management (SRM) is not just about holding suppliers to account; it’s about fostering strong, collaborative partnerships to ensure successful outcomes, ironically in our experience most of the issues we see from suppliers are usually due to the buying organisation themselves not performing and not giving the suppliers the right information/environment/platform to succeed. For Health NZ, better SRM could have addressed several key issues:
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Early Risk Identification: Regular performance reviews and robust contract governance could have identified risks—like poor data integrity or usability issues—before systems went live. Early intervention would have minimised disruptions and protected patient safety.
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Collaboration and Co-Design: The lack of user-friendly design in Auckland’s new IT system highlights the importance of co-design. Effective SRM encourages suppliers to engage directly with end-users, such as hospital staff, throughout the design and testing process to ensure the system meets practical needs.
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Accountability Through KPIs: Strong SRM frameworks hold both suppliers and internal Health NZ staff accountable to clear Key Performance Indicators (KPIs). Regular monitoring of progress, quality, and timelines would have kept suppliers focused on delivering outcomes that align with Health NZ’s goals.
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Strategic Planning for System Life Cycles: Suppliers can play a critical role in planning the long-term life cycles of IT systems. While Health NZ could have leveraged supplier expertise to develop technology roadmaps and implement incremental upgrades, this is often challenging within the constraints of Government Procurement Rules, which require open and transparent tendering processes. Managing this balance effectively requires highly experienced procurement personnel to engage suppliers early while adhering to these regulations.
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Innovation and Value Creation: Rather than treating IT projects as transactions, SRM fosters a strategic partnership where suppliers are incentivised to bring innovation and continuous improvements. This approach can maximise value and deliver sustainable benefits for healthcare providers.
A Shared Responsibility for Success
Blaming suppliers alone would be unfair. Successful outcomes require collaboration and clear accountability on both sides. For Health NZ, this means:
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Setting clear expectations and performance benchmarks for suppliers and internal teams managing these suppliers (including what behaviours are expected).
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Involving healthcare professionals in IT projects from the outset to ensure solutions align with practical needs.
Adding further pressure to Health New Zealand's IT challenges is the recent announcement of a reduction in headcount, with many of the cuts impacting procurement teams—the very people responsible for running SRM activities and programmes. Such reductions will likely have a profound impact on critical areas like scoping technical requirements, maintaining operational interfaces with suppliers, and ensuring adequate project management capacity—all of which are essential to achieving successful project outcomes. Without these capabilities, the risk of further failures increases significantly.
Procurement professionals play a critical role in managing supplier relationships, overseeing performance, and ensuring accountability. Without dedicated teams to facilitate SRM processes, Health NZ risks further disruptions, as suppliers may lack the necessary oversight, governance, and collaboration to deliver effective outcomes. The loss of procurement expertise compounds existing issues and weakens Health NZ’s ability to navigate complex IT projects, ultimately affecting frontline services and patient care.
The Health NZ procurement team is currently focused on a traditional ‘cost out’ programme as they rightly should be, but given current government rules requiring a transparent RFP or Tender process, which can take many months, delivering results becomes increasingly challenging. A better approach would be to invest in SRM and utilise existing supplier relationships to both help with identifying where the inefficiencies (and costs) are but to also ensure successful delivery of existing projects like the Auckland Hospital new IT system.
Health New Zealand’s recent IT challenges—from obsolete systems to the “ghastly” new implementation—underline the need for not only better funding and supplier management but also potentially stronger internal processes, project management, and staff capability. While funding constraints may persist, SRM offers a pathway to achieving better outcomes with existing resources. By building stronger partnerships, improving oversight, and engaging end-users throughout the development process, Health NZ can ensure that future IT investments deliver value where it matters most: on the frontlines of patient care.
Investing in good SRM isn’t just a technical fix; it’s a strategic imperative for a healthcare system that New Zealanders can trust.
About the Author: Alan Day is CEO and Founder of State of Flux, the world’s leading experts in supplier management, specialising in building collaborative buyer-supplier partnerships that drive better outcomes for organisations all around the globe. State of Flux has written 16 books on Supplier Management and these can be downloaded here - https://srm.stateofflux.co.uk/reports-publications